Indicators / Volume / Chaikin Money Flow
Chaikin Money Flow (CMF) Explained: Accumulation vs Distribution
Quick answer
Chaikin Money Flow (CMF) measures whether volume is flowing into or out of a market over a set period. Above zero suggests accumulation, with closes near the highs on volume; below zero suggests distribution. It is most useful for confirming trends and breakouts.
Video: Chaikin Money Flow for Beginners.
What CMF measures
CMF looks at where each candle closes within its range and weights that by volume. Closes near the high on heavy volume count as buying pressure; closes near the low count as selling pressure. The result is averaged over 20 or 21 periods.
How CMF is calculated
Money flow volume = multiplier × volume
CMF = sum of money flow volume (20) ÷ sum of volume (20)
Settings
The default is 20 or 21 periods. Shorter settings react faster but swing around zero more often; longer settings show the bigger accumulation picture.
How to read CMF
1. The zero line
Above zero: accumulation. Below zero: distribution. Sustained readings on one side matter more than brief crosses.
2. Strength of the reading
Readings beyond about +0.10 or −0.10 show clear pressure. Readings near zero mean volume is not taking a side.
3. Divergence
Price rising while CMF falls toward or below zero shows the rally is not backed by buying volume. That is an early warning, especially at resistance.
Common mistakes
- Trading every zero cross. CMF wobbles around zero in quiet markets.
- Ignoring gaps. CMF only looks within each candle, so it can miss pressure shown by gaps.
- Using it on low-volume markets. Thin volume makes the reading unreliable.
What to pair CMF with
- OBV for a cumulative view of volume.
- Volume itself for breakout confirmation.
- Moving averages for trend context.
Chaikin Money Flow FAQ
What does CMF above zero mean?
Buying pressure: candles are closing toward their highs on volume, which suggests accumulation.
What is the best CMF setting?
20 or 21 periods, the default, works on most charts.
CMF or OBV?
CMF shows recent pressure over a window; OBV is a running total. Many traders use both.